Although India's overexposure within the emerging market basket has gradually declined, India has overtaken China in terms of direct equity allocation by US investors. The data released by US Treasury shows India makes up 1.8% of US foreign equity holdings as on December 2015, as against 1.6% of China. US investors direct investment in Indian equities has risen from $7 billion in September 2013 to $12 billion in December 2015.

During the same period US investors' direct investment in Chinese equities has declined from $12.8 billion to $11.1 billion. However, India's overexposure within the EM basket has gradually declined in 2015.

On the other hand, the average US investor's equity allocation to emerging markets is down to 12%, substantially lower than the peak of 18% in December 2009, according to data compiled by Kotak Institutional Equities.

From a peak of 5.2% (January 2015), the over-allocation into India by active funds has come down to 3.7% in January 2016.